The latest PMI data, compiled by IHS Markit and CIPS, showed that growth has picked up since December at 56.3% in January, up from 54.3%. New orders also rose at the fastest pace since August 2021 and input buying was the strongest for six months.
Commercial work came out on top as the best performing category at 57.6%. Civil engineering returned to growth at 53.2%, meanwhile, house building activity increased at the slowest pace for four months at 54.3%
New work saw the fastest rate of growth since August 2021 and supply chain difficulties have improved as the latest downturn in vendor performance saw the smallest since September 2020. The overall rate of inflation eased to its lowest for 10 months.
Optimism was the strongest since May 2021 as 53% of those surveyed forecast a rise in output during the year ahead, while only 5% predict a decline.
Tim Moore, director at IHS Markit, said: “UK construction companies started the year on a strong footing as business activity picked up speed and new orders expanded to the greatest extent since last August.
The composition of growth has become more tilted towards commercial projects as house building lost momentum and civil engineering remained subdued.
Commercial construction activity benefited from fewer concerns about the Omicron variant and strong business optimism about recovery prospects over the course of 2022.
Residential work increased at one of the slowest rates since spring 2020, which is an early sign that cost of living concerns and rising interest rates could start to dampen the post-lockdown surge in spending.
Higher energy, transport and raw material bills led to across the board increases in input prices during January, but fewer supply issues helped ease the overall rate of cost inflation to its lowest since March 2021.
Encouraging to see this positive start to the year
Commenting on the latest PMI data, Jan Crosby, head of infrastructure, building and construction at KPMG UK, said:
“The sector plays a vital role in supporting our economy, and it’s encouraging to see this positive start to the year. As the country emerges from the pandemic and many are facing cost of living increases, it’s essential that we continue to invest in sustainable infrastructure for the future to help drive economic growth.
“We’ve seen commitment to invest through a raft of projects spanning industries such as power, health and office spaces so far this year. As some pressures like supply chain delays slowly start to reduce and we enter the new, post-pandemic normal, this commitment points to a positive future for a sector that has weathered the storm well over the past two years.”
Strong business optimism
Mike Hedges, director at Beard said: “After a turbulent 2021, January gave plenty of reasons for optimism in the construction sector.
“Growth picked up with new orders and activity levels both increasing. This is in turn generating job opportunities and the sector should look for diverse candidates to fill these roles.
“After a few months of caution, commercial work led the growth as a positive economic outlook gave clients the confidence to green light new projects.
“While lead times are still longer than usual and cost inflation continues place project budgets under pressure, supply chain issues are easing and the strong pipeline of work is building confidence for construction firms.
“With activity ramping up savvy contractors will need to work closely with supply chains to overcome delays, whilst supporting prompt payment practices.
“As the economy continues to recover, there is optimism that 2022 could be a sustained year of growth in the industry.”
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